British Virgin Islands
This report analyses the implementation of the AEOI Standard in the British Virgin Islands with respect to the requirements of the AEOI Terms of Reference. It assesses both the legal frameworks put in place to implement the AEOI Standard and the effectiveness of the implementation of the AEOI Standard in practice.
The methodology used for the peer reviews and that therefore underpins this report is outlined in Chapter 2.
Overall findings
AEOI legal framework
The British Virgin Islands’ legal framework implementing the AEOI Standard is in place and is consistent with the requirements of the AEOI Terms of Reference. This includes the British Virgin Islands’ domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) and its international legal framework to exchange the information with all of the British Virgin Islands’ Interested Appropriate Partners (CR2).
Effectiveness of AEOI in practice
The British Virgin Islands’ implementation of the AEOI Standard is partially compliant with the requirements of the AEOI Terms of Reference to ensure the effectiveness of the AEOI Standard in practice. While the British Virgin Islands is on track with respect to exchanging the information in an effective and timely manner (CR2), there are significant issues with respect to ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures (CR1).
Overall rating in relation to the effectiveness in practice: Partially Compliant
General context
The British Virgin Islands commenced exchanges under the AEOI Standard on a non-reciprocal basis in 2017 (i.e. it sends but it does not receive information).
In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, the British Virgin Islands:
enacted the Mutual Legal Assistance (Tax Matters) (Amendment) (No.2) Act, 2015, as amended in 2018 and in 2022; and
Under this framework Reporting Financial Institutions were required to commence the due diligence procedures in relation to New Accounts from 1 January 2016. With respect to Preexisting Accounts, Reporting Financial Institutions were required to complete the due diligence procedures on High Value Individual Accounts by 31 December 2016 and on Lower Value Individual Accounts and Entity Accounts by 31 December 2017.
Following the initial Global Forum peer review, the British Virgin Islands made various amendments to its legislative framework to address issues identified, the last of which was effective from 1 June 2022.
With respect to the exchange of information under the AEOI Standard, the British Virgin Islands:
has the Convention on Mutual Administrative Assistance in Tax Matters in place1 and activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2017; and
put in place three bilateral agreements.2
Table 1 sets out the number of Financial Institutions in the British Virgin Islands that reported information on Financial Accounts in 2021 as defined in the AEOI Standard (essentially because they maintained Financial Accounts for Account Holders, or that were related to Controlling Persons, resident in a Reportable Jurisdiction). It also sets out the number of Financial Accounts that they reported in 2021. In this regard, it should be noted that the British Virgin Islands requires the reporting of Financial Accounts based on a prescribed list of exchange partners and some accounts may be required to be reported more than once (e.g. jointly held accounts or accounts with multiple related Controlling Persons), which is reflected in the figures below. These figures provide key contextual information to the development and implementation of the British Virgin Islands’ administrative compliance strategy, which is analysed in the subsequent sections of this report.
Table 2 sets out the number of exchange partners to which information was successfully sent by the British Virgin Islands in the past few years (including where the necessary frameworks were in place, containing an obligation on Reporting Financial Institutions to report information, but no relevant Reportable Accounts were identified). These figures provide key contextual information in relation to the British Virgin Islands’ exchanges in practice, which is also analysed in subsequent sections of this report.
In order to provide for the effective implementation of the AEOI Standard, in the British Virgin Islands:
the International Tax Authority (the ITA, the tax authority) has the responsibility to ensure the effective implementation of the due diligence and reporting obligations by Reporting Financial Institutions and for exchanging the information with the British Virgin Islands’ exchange partners;
technical solutions necessary to receive and validate the information reported by Reporting Financial Institutions were put in place by requiring Financial Institutions to register into the BVIFARs portal and by performing automated and manual validations of the information reported by Reporting Financial Institutions; and
the Common Transmission System (CTS) is used for the exchange of the information, along with the associated file preparation and encryption requirements.
It should be noted that the review of the British Virgin Islands’ legal frameworks implementing the AEOI Standard concluded with the determination that the British Virgin Islands’ domestic and international legal frameworks are In Place. This has been taken into account when reviewing the effectiveness of the British Virgin Islands’ implementation of the AEOI Standard in practice.
Findings and conclusions on the legal frameworks
The detailed findings and conclusions on the AEOI legal frameworks for the British Virgin Islands are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Domestic legal framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.
The British Virgin Islands’ domestic legislative framework is in place and contains all of the key aspects of the CRS and its Commentary requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (SRs 1.1 – 1.3). It also provides for a framework to enforce the requirements (SR 1.4).
SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.
The British Virgin Islands has defined the scope of Reporting Financial Institutions in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.
The British Virgin Islands has defined the scope of the Financial Accounts that are required to be reported in its domestic legislative framework and incorporated the due diligence procedures that must be applied to identify them in accordance with the CRS and its Commentary.
SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.
The British Virgin Islands has incorporated the reporting requirements in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.
The British Virgin Islands has a legislative framework in place to enforce the requirements in accordance with the CRS and its Commentary.
CR2 International legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.
The British Virgin Islands’ international legal framework to exchange the information is in place, is consistent with the Model CAA and its Commentary and provides for exchanges with all of the British Virgin Islands’ Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from the British Virgin Islands and that meet the required standard in relation to confidentiality and data safeguards) (SRs 2.1 – 2.3).
SR 2.1 Jurisdictions should have exchange agreements in effect with all Interested Appropriate Partners that permit the automatic exchange of CRS information.
The British Virgin Islands has exchange agreements that permit the automatic exchange of CRS information in effect with all its Interested Appropriate Partners.
SR 2.2 Such an exchange agreement should be put in place without undue delay, following the receipt of an expression of interest from an Interested Appropriate Partner.
The British Virgin Islands put in place its exchange agreements without undue delay.
SR 2.3 Jurisdictions should ensure that the exchange agreements in effect provide for the exchange of information in accordance with the requirements of the Model CAA.
The British Virgin Islands’ exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.
Findings and conclusions in relation to effectiveness in practice
The detailed findings and conclusions in relation to effectiveness in practice of AEOI for the British Virgin Islands are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Effectiveness in practice: Jurisdictions should ensure that in practice Reporting Financial Institutions correctly implement the due diligence and reporting procedures, which includes a requirement for jurisdictions to have in place an administrative framework to ensure the effective implementation of the CRS.
The British Virgin Islands’ implementation of the AEOI Standard is partially compliant with respect to ensuring that Reporting Financial Institutions are correctly conducting the due diligence and reporting procedures. More specifically, while the British Virgin Islands is meeting expectations with respect to collaboration with its exchange partners to ensure effectiveness (SR 1.6), there are significant issues with respect to the British Virgin Islands ensuring effectiveness in a domestic context, such as through having an effective administrative compliance framework and related procedures (SR 1.5). The British Virgin Islands should continue its implementation process to ensure its effectiveness, including by addressing the recommendations made.
SR 1.5 Jurisdictions should ensure that in practice Reporting Financial Institutions identify the Financial Accounts they maintain, identify the Reportable Accounts among those Financial Accounts, as well as their Account Holders, and where relevant Controlling Persons, by correctly conducting the due diligence procedures and collect and report the required information with respect to each Reportable Account. This includes having in place:
an effective administrative compliance framework to ensure the effective implementation of, and compliance with, the CRS. This framework should:
be based on a strategy that facilitates compliance by Reporting Financial Institutions and which is informed by a risk assessment in respect of the effective implementation of the CRS that takes into account relevant information sources (including third party sources);
include procedures to ensure that Financial Institutions correctly apply the definitions of Reporting Financial Institutions and Non-Reporting Financial Institutions;
include procedures to periodically verify Reporting Financial Institutions’ compliance, conducted by authorities that have adequate powers with respect to the reviewed Reporting Financial Institutions, with procedures to access the records they maintain; and
effective procedures to ensure that Financial Institutions, persons or intermediaries do not circumvent the due diligence and reporting procedures;
effective enforcement mechanisms to address non-compliance by Reporting Financial Institutions;
strong measures to ensure that valid self-certifications are always obtained for New Accounts;
effective procedures to ensure that each, or each type of, jurisdiction-specific Non-Reporting Financial Institution and Excluded Account continue to present a low risk of being used to evade tax; and
effective procedures to follow up with a Reporting Financial Institution when undocumented accounts are reported in order to establish the reasons why such information is being reported.
In order to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, the British Virgin Islands implemented some of the requirements in accordance with expectations. However, significant issues were identified. The key findings were as follows:
The British Virgin Islands has developed a compliance strategy to ensure that Financial Institutions correctly implement the requirements under the AEOI Standard in practice. It has also performed communication and educational activities, such as issuing guidance to assist Financial Institutions with their obligations under the AEOI Standard.
The British Virgin Islands has conducted a risk assessment that takes into account a range of relevant information sources, such as the information reported by Reporting Financial Institutions, information provided by the regulator, information received from partner jurisdictions and the nature and size of the business operated by the Financial Institutions.
The British Virgin Islands has worked effectively to understand its population of Financial Institutions, including relevant non-regulated entities, requiring all Financial Institutions to register into the BVIFARs portal and to classify themselves as Reporting Financial Institutions or Non-Reporting Financial Institutions. It compares this list against other relevant information sources, such as the list of Financial Institutions held by the financial regulator and the Foreign Financial Institution list for FATCA purposes. It also uses its domestic BOSSs portal, which contains information about the business operated by certain entities which can indicate whether they have reporting obligations under the AEOI Standard. The British Virgin Islands also performs sample checks to verify the correct classification of the Financial Institutions to ensure they are reporting as required. The British Virgin Islands intends to keep its understanding of its Financial Institution population up to date on a routine basis.
The ITA appears to have the necessary powers to discharge its functions, including powers to access records held by Reporting Financial Institutions. With respect to resourcing, the ITA also appears to have allocated the necessary resources to discharge its functions. It has assigned the equivalent to eight full time staff to monitor and ensure compliance by Reporting Financial Institutions, which have access to IT systems and tools to conduct risk assessments. The ITA has also assigned seven full time staff to carry out the exchanges with partner jurisdictions and to work on registration of the Financial Institutions. There is an administrative team of 13 members to support the previously mentioned functions.
The British Virgin Islands has developed procedures to review and verify the compliance of Reporting Financial Institutions with all aspects of the AEOI Standard, including procedures to carry out in-depth reviews and the access of records held by Reporting Financial Institutions. The British Virgin Islands has developed a procedure whereby it performs reviews through desk-based audits, to account for the nature of the British Virgin Islands’ Financial Institutions, of which many are located outside of the jurisdiction. It has carried out some of these reviews and has accessed some underlying account records to verify compliance with the AEOI Standard. It has also identified some cases that are going to be subject to reviews through onsite visits, and has started to carry out a limited number of them.
The British Virgin Islands has put in place a process to receive information from the AML regulator, including information gained from inspections carried out by that regulator. However, only a small proportion of entities that are Financial Institutions for purposes of the AEOI Standard are also regulated for AML purposes and the information received will only be for intelligence gathering purposes rather than for direct verification of compliance with the requirements of the AEOI Standard, in particular related to the identification of Controlling Persons.
In order to enforce the requirements, the British Virgin Islands appears to have procedures for the referral of non-compliance to its legal unit for the application of criminal sanctions and has started such procedure in some cases, although these cases have not yet been finalised. The British Virgin Islands is developing administrative penalties and sanctions as an alternative and is yet to develop the procedures to apply them.
The British Virgin Islands has plans to review whether self-certifications are obtained as required and has reviewed a limited number of self-certifications obtained with respect to particular accounts based on a random selection of accounts reported. It appears that the reviews will include a particular focus on self-certifications obtained after the opening of an account.
The British Virgin Islands follows up with Reporting Financial Institutions that report undocumented accounts. The British Virgin Islands also appears ready to take effective action to address circumvention of the requirements if such circumvention is detected.
It is noted that the British Virgin Islands does not have a jurisdiction-specific list of Non-Reporting Financial Institutions or Excluded Accounts for ongoing monitoring.
Table 3 provides a summary of the specific activities undertaken, or that are planned to be undertaken, in relation to each of the key parts of the framework described above.
Although the British Virgin Islands indicates that it uses information on the proportion of Financial Accounts reported that include information on the Tax Identification Numbers and/or dates of birth with respect to the individuals associated with them to inform its compliance strategy, this information is gathered on an ad-hoc and manual basis and it does not yet have the ability to provide overall statistics. The British Virgin Islands is currently working with its IT provider to be able to provide this information in the near future. These data points are key to exchange partners to effectively utilise the information and are important to developing an effective compliance strategy to ensure the AEOI Standard is being effectively implemented.
Information provided by the British Virgin Islands showed a higher number of undocumented accounts reported by its Reporting Financial Institutions, when compared to other jurisdictions, which should only occur when it was not possible for the Reporting Financial Institution to identify whether the accounts are held by Reportable Persons. However, follow-up actions undertaken by the British Virgin Islands on undocumented accounts reported until 2019 had confirmed that the number of undocumented accounts that should have been reported as such is considerably lower. The British Virgin Islands is taking follow-up actions to ensure correct reporting, following which the proportion of undocumented accounts would be in line with most other jurisdictions. The number of undocumented accounts has reduced over time.
More generally, many of the exchange partners that received a significant number of records from British Virgin Islands indicated that they achieved a success rate when matching the information received from British Virgin Islands with their taxpayer database that was broadly equivalent to, or better than, what they usually achieve.
Based on these findings it was concluded that the British Virgin Islands is partially meeting expectations in ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, including by having in place the required administrative compliance framework and related procedures. More specifically, significant issues have been identified, including with respect to the extent of the implementation of the British Virgin Islands’ compliance strategy and verification activities, its monitoring of key information points such as Tax Identification numbers and dates of birth and with respect to the enforcement procedures. The British Virgin Islands should therefore continue its implementation process accordingly, including by addressing the recommendations made.
The British Virgin Islands should ensure it continues to implement its plan to verify compliance, including by expanding the number verification activities to ensure Reporting Financial Institutions are complying with all aspects of their due diligence obligations.
The British Virgin Islands should actively monitor the interaction between its AML and AEOI frameworks to ensure that the collection and reporting of information under the AEOI Standard is in accordance with the requirements.
The British Virgin Islands should further implement its procedures to monitor and verify whether Reporting Financial Institutions are obtaining self-certifications as required, ensuring that the self-certifications contain all required information.
The British Virgin Islands should develop and implement administrative procedures to enable effective enforcement and appropriate sanctions when non-compliance is detected.
The British Virgin Islands should implement systems to collect and monitor information on the reporting of Tax Identification Numbers and dates of birth to inform its compliance strategy.
SR 1.6 Jurisdictions should collaborate on compliance and enforcement. This requires jurisdictions to:
use all appropriate measures available under the jurisdiction’s domestic law to address errors or non-compliance notified to the jurisdiction by an exchange partner; and
have in place effective procedures to notify an exchange partner of errors that may have led to incomplete or incorrect information reporting or non-compliance with the due diligence or reporting procedures by a Reporting Financial Institution in the jurisdiction of the exchange partner.
It should be noted that, as the British Virgin Islands exchanges information on a non-reciprocal basis and does not therefore receive information, it is not required to have in place procedures to notify its exchange partners. SR 1.6 b) has therefore not been assessed in this case.
In order to collaborate on compliance and enforcement, it appears that the British Virgin Islands implemented all of the requirements in relation to issues notified to them (i.e. under Section 4 of the MCAA or equivalent) in accordance with expectations. While no such notifications have yet been received, the British Virgin Islands has the necessary systems and procedures to process them as required.
Based on these findings it was concluded that the British Virgin Islands is fully meeting expectations in relation to collaborating with its exchange partners to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures. The British Virgin Islands is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
CR2 Effectiveness in practice: Jurisdictions should exchange the information effectively in practice, in a timely manner, including by sorting, preparing, validating and transmitting it in accordance with the AEOI Standard.
The British Virgin Islands’ implementation of the AEOI Standard is on track with respect to exchanging the information effectively in practice, including in relation to sorting, preparing and validating the information (SR 2.4), most of the requirements in relation to correctly transmitting the information in a timely manner (SRs 2.5 and 2.7) and providing corrections, amendments or additions to the information (SR 2.9). However, some issues were found with respect to exchanging information in a timely manner with all exchange partners (SR 2.6). The requirements in relation to the receipt of the information (SR 2.8) have not been assessed as the British Virgin Islands exchanges information non-reciprocally, so does not receive information. The British Virgin Islands is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
SR 2.4 Jurisdictions should sort, prepare and validate the information in accordance with the CRS XML Schema and the associated requirements in the CRS XML Schema User Guide and the File Error and Correction-related validations in the Status Message User Guide (i.e. the 50000 and 80000 range).
Four (or 6%) of the British Virgin Islands’ exchange partners reported rejecting more than 25% of the files received, of which one reported rejecting more than 50% of files received, due to the technical requirements not being met. This is a relatively high amount when compared to other jurisdictions, although it has reduced over time. It was noted that the British Virgin Islands is taking action to successfully address all of the issues.
Based on these findings it was concluded that, overall, the British Virgin Islands is meeting expectations in relation to sorting, preparing and validating the information. It was also noted that there is room for improvement with respect to the processes to sorting, preparing and validating the information. The British Virgin Islands is therefore encouraged to continue its implementation process accordingly, including in relation to the areas highlighted.
The British Virgin Islands should continue to engage with its exchange partners to ensure the issues raised are addressed.
The British Virgin Islands should review its systems and procedures to sort, prepare and validate the information to ensure they meet the requirements of the AEOI Standard.
SR 2.5 Jurisdictions should agree and use, with each exchange partner, transmission methods that meet appropriate minimum standards to ensure the confidentiality and integrity of the data throughout the transmission, including its encryption to a minimum secure standard.
In order to put in place an agreed transmission method that meets appropriate minimum standards in confidentiality, integrity of the data and encryption for use with each of its exchange partners, the British Virgin Islands linked to the CTS.
Based on these findings it was concluded that the British Virgin Islands is fully meeting expectations in relation to agreeing and using appropriate transmission methods with each of its partners. The British Virgin Islands is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.6 Jurisdictions should carry out all exchanges annually within nine months of the end of the calendar year to which the information relates.
Five exchange partners highlighted delays in the sending of information by the British Virgin Islands (representing 7% of its partners). This represents a very high proportion of exchange partners and has not improved over time. It was noted that the British Virgin Islands successfully addressed most of the issues and is working to send the corresponding information to the remaining partner.
Based on these findings it was concluded that, overall, the British Virgin Islands is meeting expectations in relation to exchanging the information in a timely manner. It was also noted that there is room for improvement with respect to sending information in a timely manner. The British Virgin Islands is encouraged to continue to ensure the ongoing effectiveness of its implementation, including in relation to the area highlighted.
The British Virgin Islands should ensure it sends information to all of its exchange partners in a timely manner.
SR 2.7 Jurisdictions should send the information in accordance with the agreed transmission methods and encryption standards.
Feedback from the British Virgin Islands exchange partners did not raise any concerns with respect to the British Virgin Islands use of the agreed transmission methods and therefore with the British Virgin Islands’ implementation of this requirement.
Based on these findings it was concluded that the British Virgin Islands is fully meeting expectations in relation to sending the information in accordance with the agreed transmission methods and encryption standards. The British Virgin Islands is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.8 Jurisdictions should have the systems in place to receive information and, once it has been received, should send a status message to the sending jurisdictions in accordance with the CRS Status Message XML Schema and the related User Guide.
It should be noted that, as the British Virgin Islands exchanges information on a non-reciprocal basis and does not therefore receive information, it is not required to have in place procedures to notify its exchange partners. SR 2.8 has therefore not been assessed in this case.
SR 2.9 Jurisdictions should respond to a notification from an exchange partner as referred to in Section 4 of the Model CAA (which may include Status Messages) in accordance with the timelines set out in the Commentary to Section 4 of the Model CAA. In all other cases, jurisdictions should send corrected, amended or additional information received from a Reporting Financial Institution as soon as possible after it has been received.
The British Virgin Islands appears ready to respond to notifications and to provide corrected, amended or additional information in a timely manner and no such concerns were raised by the British Virgin Islands’ exchange partners and therefore with respect to the British Virgin Islands’ implementation of these requirements.
Based on these findings it was concluded that the British Virgin Islands appears to be meeting expectations in relation to responding to notifications from exchange partners and the sending of corrected, amended or additional information. The British Virgin Islands is encouraged to continue to ensure the ongoing effectiveness of its implementation.
Assessed jurisdiction’s comments on the assessment of effectiveness in practice
The Virgin Islands has been committed to implemented in the AEOI standard from inception as an early adopter. It had completed its legislative framework and put in place IT capabilities to ensure that it was able to collect and exchange information by the first exchanges in 2017. Unfortunately, the Virgin Islands was significantly impacted by Hurricanes Irma and Maria which hindered its ability to exchange the required information and to also take steps to ensure compliance of all FIs with the standard. As the information for the 2017 exchanges had already been collected before the Hurricanes hit, the Virgin Islands was able to establish a makeshift connection to CTS and exchange information with its partners in early 2018. Following this no further work could be done with regard to AEOI due to the damages to infrastructure etc. The International Tax Authority (ITA) who is responsible for exchange of information was not operation until early 2020 when it was able to find suitable office accommodations to restart its operations after the Hurricanes. During the hiring process (as the ITA had lost a significant portion of its staff following the Hurricanes) the World was affected by the Global Pandemic which again hindered the ITA’s ability to hire persons in its new Compliance Unit. The ITA was however, able to engage personnel and continue its work later in 2020. In 2021 significant strides were made with regard to compliance and these have been reflected in the report above, While we recognise that we have been significantly hampered in implementing the standard we are of the view that the Virgin Islands has made significant strides despite the unique challenges it has faced since 2017. The Virgin Islands remains committed to meeting its obligations and will continue to work toward the implementation of the AEOI standard.